Procurement

E-Procurement is an online procurement strategy that is progressively becoming more popular with businesses globally. These days, more businesses are beginning to see that e-Procurement trumps traditional procurement when it comes to efficiency. With e-Procurement, the purchasing and processing phase is simplified and sped up as a result of real-time interaction with pre-approved suppliers and trading partners, regardless of location or time.

Supplier consolidation – also known as vendor rationalisation – is a supply chain management strategy that aligns with the common goal of procurement, cost reduction. It involves reducing the number of suppliers a company does business with, in the belief that supplier consolidation is cost effective and improves operational efficiency.

In our previous articles, we defined the concept and key activities of spend analysis using a basic business process. We revealed that the core function of spend analysis is to assign material categories which represent the supply market view to payment data incurred at the organisation level. This concluding article will help to define the material categories, and some metrics that could be adopted to manage the spend analysis program.

As stated in our previous article, it is common for spend data to be extracted from accounting and financial systems. These systems are reliably maintained to provide payment data in currency units. It follows that spend data extracted from accounting systems do inherit a number of accounting terms with it, and these terms do not match Procurement’s view of the supply market. Let us use an example to illustrate the situation.

In our previous article, we introduced a high-level spend analysis process, and the considerations for defining the program. We will now examine the process steps of data extraction and data validation.Continue reading “Spend Analysis – Part 2”

As stated in our previous article, the importance of spend analysis to support Procurement cannot be over emphasised. At the same time, the spend analysis topic is also one of the most misunderstood among business users and Procurement alike. So the intention of this and the next few articles is to dispel some myths about spend analysis, and answer the questions that were seldom asked about the topic.

In our previous article, we highlighted the difference of spend from expenses. While expenses stated in financial statements contain accounting entries such as depreciation and inventory write-off, spend reflects the actual money paid by an organisation to external parties, regardless of whether they are used to pay for services, products or assets. In this article, we leave the detailed definition of spend and analysis methods behind for a while, and start to look at the key performance metrics that are relevant to Procurement.

If you had followed our previous article, you would have understood the structure and key elements of Procurement. Now when you are ready to implement a new procurement function, a key question is the resources that are needed in the new function and its scope. In other words, “What is the size of the problem?”Continue reading “Indirect Spend And Potential For Procurement”

In our previous article, we highlighted the difference between Direct and Indirect Procurement. Professionally managed indirect procurement has grown in importance in the last 15 years or so. For organisations who implemented such an initiative, the result was a convincing one. In this article, we introduce Procurement as a business function for organisations who have yet to embark on the journey. It is best to keep in mind that the Procurement function should act as the focal point for an organisation to interact and work with the supply or selling markets; synonymous to the Sales and Marketing functions who act as the channel to the customer or buying markets.

Mention “Procurement” and the act of placing orders for required business goods and supplies come to mind. As a business function, Procurement is one of the most understated functions, being perceived more of a supporting back-room function than a strategic one. And most of these perceptions have to do with the fact that many of us consider ourselves as “experts” in procurement, being able to handle with ease our weekly shopping and scouring the best deals for electronic gadgets from the numerous online marketplaces. However, the role of Procurement in a modern organisation needs to be addressed differently from our personal and private experience.